Legislators warn of new minibond fiasco under MPF law change plan

Several legislators believe planned legal changes that would allow four regulators to monitor Mandatory Provident Fund salespeople would create regulatory overlap and confusion, leading to a repeat of the minibond fiasco.

The government last week proposed changes to ensure all of the 28,365 MPF salespeople and new entrants be registered with the Mandatory Provident Funds Scheme Authority.

The authority is also proposed to be the sole body to receive MPF-related complaints.

But in terms of daily monitoring and investigation as well as penalties, the government proposes individual regulators monitor their respective sectors - the Hong Kong Monetary Authority for banks, the Office of the Commissioner of Insurance for insurers, and the Securities and Futures Commission for fund managers and brokers.

This would mean an errant salesperson would be pulled up by both the MPFA and the regulator of their own sector, Civic Party legislator Ronny Tong Ka-wah said.

Paul Chan Mo-po, a legislator for the accountancy sector, said allowing more than one regulator to operate in a single field was fraught with danger, as was evident in the Lehman minibond saga. Legislators and investors had then blamed a fragmented regulatory model for the crisis as the SFC regulated investment products and brokers but had no power to regulate bank staff, who were accused of mis-selling and were under the regulatory radar of the HKMA.

Now the government is allowing different regulators to share the regulatory work for MPF salespeople, Chan said. But different regulators may have different enforcement standards, which might well lead to another minibond fiasco. We don't understand why the government won't allow a single regulator to do the job.


Au King-chi, permanent secretary for financial services and the treasury, however said the MPFA would issue a code of conduct for other regulators to follow.

Allowing different regulators to monitor the salespeople of their respective sectors is the best model as it enables regulators with the best understanding of the sector to do the job, Au said.

The government's proposal is aimed at preventing mis-selling when the long-awaited employee choice arrangement comes into being. Under that system, the 2.5 million employees will be able to choose their own MPF providers to manage their share of pension contributions.

Employees contribute 5 per cent of their salary, capped at HK$1,000 a month, to a retirement account. This is matched by the employer, who also chooses the MPF provider. Copyright (c) 2011. South China Morning Post Publishers Ltd.